From 2005 to 2017, the amount of data flowing across borders every second grew by a factor of 148. The availability of cheap, fast digital communication has boosted trade. E-commerce platforms allow buyers and sellers to find each other more easily. The Internet of Things-everyday products with Internet connections-lets companies track shipments around the world and monitor their supply chains.
With the advent of rapid digitalization, many developing countries like Bangladesh are focusing on the digital economy: a global market for digital outsourcing.
According to Azaz Zaman, lecturer of finance at Bangladesh Army International University of Science and Technology (How the digital economy is shaping a new Bangladesh, published in Weekly Agenda of World Economic Forum on June 19, 2019), the digitalization of a country’s economy not only drives innovation in its service industry, it also fuels domestic job opportunities, enabling faster economic growth. In the quest to lower costs and risks, many large corporations in developed nations like the US, the UK and Australia are turning to IT outsourcing from countries including Bangladesh, leading to a recent boom in freelancing.
Freelancing jobs include everything from computer programming to web design, tax preparation, and search engine optimization. This has generated a wide range of new opportunities for people in emerging markets that did not previously exist. Asia has become the number-one region for providing outsourcing services to the rest of the world.
Freelancing offers many advantages, including the freedom to choose clients and projects, access to the global market, and flexibility over location. Most importantly, freelancers can avoid the long, frustrating hours commuting in traffic in the Bangladeshi capital of Dhaka.
Consequently, freelancing has become a popular career option for many Bangladeshi people, offering a new and flexible source of income that suits their lifestyles.
The rapid digitalization of Bangladesh – including easy internet access in urban areas and government and non-government initiatives to promote freelancing – has contributed to the recent growth of this way of working.
As a result, Bangladesh has already become the second-largest supplier of online labour, according to the Oxford Internet Institute (OII). About 500,000 active freelancers are working regularly, out of 650,000 registered freelancers in the country; between them they are generating $100 million annually, according to the ICT Division of Bangladesh.
India is the largest supplier of online labour, with close to 24% of total global freelance workers, followed by Bangladesh (16%) and the US (12%). Pakistan on its part is believed to occupy the fourth position with an estimated 10% of global freelance workers. This claim, however, needs to be reconfirmed. Different countries focus on different sectors of freelancing services. For instance, technology and software development is dominated by Indian freelancers, while Bangladesh and Pakistan are the top supplier of sales and marketing support services.
In Global Economy’s Next Winners, (Foreign Affairs-July/August 2019) Susan Lund, James Manyika and Michael Spence maintain that the rise of automation means companies don’t have to worry as much about the cost of labor when choosing where to invest. In recent decades, companies have sought out low-paid workers, even if that meant building long, complex supply chains. That is no longer the dominant model: today, only 18 percent of the overall trade in goods involves exports from a low-wage country to a high-wage one. Other factors, such as access to resources, the speed at which firms can get their products to consumers, and the skills available in the work force, are more important.
Companies are building fully automated factories to make textiles, clothes, shoes, and toys-the labour-intensive goods that gave China and other developing countries their start in global manufacturing. Exports from low-wage countries to high-wage countries fell from 55 percent of all exports of those kinds of cheap, labor-intensive goods in 2007 to 43 percent in 2017.
Trade in services are said to take up an ever-greater share of the global economy as manufacturers and retailers introduce new ways of providing services, and not just goods, to consumers. Car and truck manufacturers, for example, are launching partnerships with companies that develop autonomous driving technologies, rent out vehicles, or provide ride-hailing services, as they anticipate a shift away from the traditional model of one-time vehicle purchases. Cloud computing has popularized pay-as-you-go and subscription models for storage and software, freeing users from making heavy investments in their own hardware. Ultrafast 5G wireless networks are expected to give companies new ways to deliver services, such as surgery carried out by remotely operated robots and remote-control infrastructure maintenance made possible by virtual re-creations of the site in question.
In a world of increasing automation, the prospects for low-income countries like Pakistan are said to be growing more uncertain. In the short term, export-led, labor-intensive manufacturing may still have room to grow in some low-wage countries. Bangladesh, India, and Vietnam are achieving solid growth in labor-intensive manufacturing exports, taking advantage of China’s rising wages and the country’s emphasis on more sophisticated and profitable products. Pakistan has missed out on this aspect so far. To make the old model of export-led manufacturing growth work, countries are expected to need to invest in roads, railways, airports, and other logistics infrastructure-and eventually in modern, high-tech factories that can compete with those in the rest of the world. Bangladesh, India, and Vietnam have taken some positive steps but will need to do more.
Technology may enable some people in low-income economies to jump ahead in economic development without retracing the paths taken by those in advanced economies. Internet access allows workers everywhere to use online freelance platforms, such as UpWork, Fiverr and Samasource, to earn supplemental income. A large share of the freelancers on these platforms are in developing countries. Khan Academy and Coursera teach languages and other skills. Google Translate is removing language barriers. Kiva and Kickstarter help aspiring entrepreneurs fund their start-ups. And telemedicine services make better health care available to people in remote places. But using those services requires widespread access to affordable high-speed Internet. Countries need to invest in digital infrastructure and education if they are to succeed in a global digital economy. Although many countries have achieved near-universal primary schooling, getting students to complete secondary school and making sure they receive a high-quality education when there are the next hurdles.
A number of middle-income countries enjoy a fixed advantage: geographic proximity to major consumer markets in advanced economies. As automation makes labor costs less important, many multinational companies are choosing to build new factories not in countries with the lowest wages but in countries that are closer to their main consumer markets and that still offer lower wages than rich countries. Mexico fits the bill for the United States; Morocco, Turkey, and eastern European countries do the same for western European countries, as do Malaysia and Thailand for richer Asian countries, such as Japan and the wealthier parts of China.
Middle-income countries also have huge opportunities to benefit from new technologies-not only by adopting them but also by building them. China, for instance, is a world leader in mobile payments. Apps such as WeChat Pay and Alipay have allowed Chinese consumers to move straight from using cash for transactions to making smartphone payments, skipping credit cards altogether. China’s third-party payment platforms handled some $15.4 trillion worth of mobile payments in 2017-more than 40 times the amount processed in the United States, according to the consulting firm iResearch. In addition to making transactions cheaper and more efficient, payment apps also create huge pools of data that their creators can use to offer individually tailored loans, insurance, and investment products.
In addition, e-commerce, mobile Internet, digital payments, and online financial services tend to contribute to more inclusive growth. A 2019 report by the Luohan Academy, a research group established by Alibaba, found that the benefits of the current digital revolution are likely to be more evenly distributed than those of previous technological revolutions. That’s because digital technologies are no longer restricted to rich people in rich countries. Today’s technologies have made it easier for people everywhere to start businesses, reach customers, and access financing. The report found that in China, digital technologies have accelerated growth in rural areas and inland provinces, places that have long lagged behind the coasts.